Annuities and the elderly

By Patricia Grace

Aging with Grace


About six months ago my mother went to her bank because she had a certificate of deposit that was coming due. The bank teller suggested she talk to someone at the bank who could discuss a financial product that could get her more money than CDs.

The teller introduced her to a “member of our investment team.” Funny that no one used the title insurance broker.

Mother was told that her money would be safe and available to her at any time should she need assisted care such as an assisted living community or in home care. Also, she was told that the annuity would be a great vehicle to use to qualify for the VA Aid & Attendance benefit. (The VA is starting to deny applications where annuities are used to impoverish the veteran or spouse.)

At 90 years of age she is very worried that she will outlive her money, so something other than a CD sounded good to her. Thank goodness she is not a person to make a quick decision. After learning that her money would be not available without a penalty fee she decided to stay with the CDs.

As the founder of a national eldercare assistance program, I have heard horror stories from families who have suffered at the hands of aggressive bankers/brokers/financial planners who sold their elderly loved one deferred annuities. In most cases the older person suffered with some form of dementia. Although in several cases the person was able to carry on a relatively normal conversation.

The Neasham case should give pause to all annuity brokers — just because a lovely old lady appears fine she may be quite sly at masking a cognitive deficit.

Insurance professionals have an obligation to their clients, themselves and the industry to err on the side of caution when dealing with an elderly client. They can do so by inviting a family member, POA or the person’s attorney to attend the sales appointment.

Annuities are not an investment vehicle for the elderly. The length of time to make a profit due to the high cost of owning one and the fact that the elderly are generally in comprised health make it inappropriate.

Because of the fees associated with these products and the restrictions on cashing them in, they are hardly ideal for older investors who may need the money quickly, or who die before the investment matures.